Protecting Your Property: The Importance of Insuring to Value and Building Ordinance or Law Coverages

a building outside, thumbnail image for protecting your property and the importance of insuring to value and building ordinance or law coverages

    Protecting Your Property: The Importance of Insuring to Value and Building Ordinance or Law Coverages 


    Property losses, particularly fire, are less common than Auto, Workers’ Compensation, and General Liability claims. However, in many cases, they can be more problematic when it comes to a claims settlement.  

    Two important keys ensuring adequate property coverage are Insurance to Value (ITV) and Building Ordinance or Law coverages. 


    Insurance to Value (ITV) 

    Since most building property losses are partial in that they don’t result in total destruction of the structure, the tendency of some insureds is to play the odds and limit the amount of insurance they purchase.  

    Why pay the premium for full coverage when chances are the full amount may never be needed? The catch is that even partial losses are subject to the coinsurance clause, so by playing the odds, you will suffer a penalty. 

    A coinsurance clause is a common part of your insurance contract which states that the insured must carry an insurance limit on its property in an amount greater than or equal to a certain percentage of its total value (commonly 80% or 90%). 

    For example, a $1,000,000 building with a 90% coinsurance should carry a minimum of $900,000 of coverage. Anything lower could result in a coinsurance penalty whereby the insured would be out-of-pocket for the underinsured portion of the building. 


    Building Ordinance or Law Coverages 

    Building Ordinance is commonly overlooked and may or may not be part of your policy. All insurance carriers are different in their approach to this coverage, but there are three components to look for: 

    Coverage A: Coverage for Loss to the Undamaged Portion of a Building 

    Coverage B: Coverage for the Cost of Demolition 

    Coverage C: Coverage for the Increased Costs of Construction 

    With aging and older buildings throughout San Luis Obispo and Santa Barbara counties, many of which don’t meet current Americans with Disabilities Act (ADA) codes and other building codes (such as fire sprinklers), these coverages become very important. Just because the term “Building Ordinance” is included in your policy doesn’t necessarily mean that all three of these coverages are included. 


    Protecting what matters 

    We spend a lot of time talking about General Liability, Workers’ Compensation, and Business Auto, all of which are necessary. However, don’t overlook the importance of having one of your most valuable assets (your property) Insured to Value or ensuring that Building Ordinance or Law is part of your coverage. 

    For personalized assistance and expert advocacy, you can reach out to your Account Manager at M&G. 

    What "covered" should feel like.

    Share This